U.S. Preparing Sweeping Insider-Trading Charges: Report

11/20/2010 08:54 am ET
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Updated
May 25, 2011

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NEW YORK: U.S. officials are preparing insider trading charges against a host of financial players, including investment bankers and hedge fund managers, The Wall Street Journal said, citing people familiar with the matter.

The charges could surpass any previous investigations on Wall Street, and examine whether certain players garnered tens of millions of dollars in illegal profits, the newspaper said in its Saturday edition.

The investigations could expose "a culture of pervasive insider trading in U.S. financial markets", especially in ways private information is transmitted to traders through connected insiders, the newspaper said, citing federal authorities.

Wall Street has been abuzz for weeks about federal authorities filing another big insider trading case that might compare to last year's Galleon case.

Two lawyers speaking to Reuters, who declined to be identified because they represent potential clients, said agents from the FBI had approached hedge fund traders over the past two weeks and a number of traders had contacted lawyers.

While the scope of the investigation is unclear it is said to focus on the use of so-called expert network firms, businesses that command big fees from hedge funds to match them up with experts in particular industries. There has been concern for years that some experts may be passing on confidential information about public companies to traders.

A year ago, shortly after the Galleon case broke, the Philadelphia office of the U.S. Securities and Exchange Commission sent out two dozen subpoenas to hedge funds and other traders, seeking information about their trading in a number of health-care related buyouts. The SEC's Philadelphia office is ground central for the agency's new task force that is cracking down on insider trading.

The Wall Street Journal report of the investigation nearing an end comes a few weeks after federal authorities charged a French doctor with passing on confidential information to a portfolio manager at FrontPoint Partners health care hedge fund.

FrontPoint has not been charged.

Authorities are also investigating Merck & Co's takeover of Schering-Plough and AstraZeneca's takeover of Medlmmune, according to The Wall Street Journal.